Book Review

Finance & Accounting for Lawyers, Second Edition, by Brian Peter Brining, JD, CPA

BVR has just released Finance & Accounting for Lawyers, Second Edition, by Brian Peter Brining, JD, CPA. The purpose of this edition is to provide the reader, lawyers particularly, with a technical overview of accounting principles and methods so the knowledge can be applied in the practice of law. In the finance and valuation sections of the textbook, the reader is introduced to the principles of finance and valuation that underlie monetary transactions that are the subject of contracts, tax matters, disputes, and litigation. The textbook proceeds to deal with damages calculations and concludes with the importance of how to present opinion evidence. This review discusses whether the author has provided the target audience with sufficient information to enable them to better understand accounting, valuation, and damages issues and equip them to understand cases that involve these matters.

BVR has just released Finance & Accounting for Lawyers, Second Edition, by Brian Peter Brining, JD, CPA. Mr. Brining is a certified public accountant and nonpracticing lawyer who has specialized in forensic accounting and business valuation for over 35 years in Southern California. He is the managing director of CBIZ-Brining Taylor Zimmer, a 20-person forensic accounting and business valuation firm that he formed in 1983. In addition, Mr. Brining has been an adjunct professor of law at the University of San Diego School of Law of law for 25 years and previously taught both graduate and undergraduate accounting.

The purpose of this edition is to provide the reader, lawyers particularly, with a technical overview of accounting principles and methods so the knowledge can be applied in the practice of law. In the finance and valuation sections of the textbook, the reader is introduced to the principles of finance and valuation that underlie monetary transactions that are the subject of contracts, tax matters, disputes, and litigation. The textbook proceeds to deal with damages calculations and concludes with the importance of how to present opinion evidence. This review discusses whether the author has provided the target audience with sufficient information to enable them to better understand accounting, valuation, and damages issues and equip them to understand cases that involve these matters.

A substantial portion of the legal practitioners come from the liberal arts, many eventually gravitate to litigation and invariably encounter financial disputes involving contracts, corporate law, business and security litigation, taxation, partnership law, tort law, transactional law, divorce law, and bankruptcy law. A key underlying premise for publication of this book is that the judicial system “thrives on the accuracy of [accounting and financial reporting], and lawyers operating within the system need to be knowledgeable about the subtleties of accounting principles and economics of finance. These disciplines are essential to the competent practice of law in the United States.” The author also writes to underscore the strengths, weaknesses, and limitations of these two disciplines to solve problems.

Chapters 1 through 6 are focused on accounting principles. These chapters cover GAAP, limitations of accounting information, double entry accounting system, accrual accounting, fixed assets and depreciation, inventory accounting and cost accounting principles. This first part of the text is what one may gently term, a crash course in accounting with illustrations. Is it effective? Yes. Brining goes straight to the critical points and includes illustrations to highlight the importance of the principle discussed. The targeted market is well-served reading this material and referring to it to understand the limits of accounting. In the accrual accounting chapter, the concept of deferred taxes is explained. This is tied to how a liability or asset can arise and the importance of each. This chapter concludes explaining the reason for accrual accounting vis-à-vis cash method accounting.

Chapters 7 through 10 focus on financial statement analysis. Chapter 7 provides an overview of analysis of financial statements, profitability ratios, solvency, liquidity, and leverage ratios. The material covered in the chapter is basic to most accounting and valuation professionals, yet, this material is new to a sizeable portion of the legal profession. Legal professionals with a focus on business matters will benefit from learning how to analyze financial statements and keeping this material close by as a reference.

Chapter 9 focuses on the time value of money and includes illustrations intended to teach the reader how to use a BAII calculator. The principal illustration shows how to calculate a mortgage loan calculation, including how to solve for interest or principal. It does the same using an ordinary annuity. This, again, is not something taught or covered in most ABA approved law schools.

Chapter 10 proceeds to dive into the principals of appraisal and valuation of businesses. Although the chapter states it introduces the principles that apply to the appraisal of all assets, it does not attempt to cover the valuation of intangibles, copyrights, patents, machinery, and equipment. Rather, the chapter discusses the approaches to determining value, standards of value (e.g., fair market value, investment value, intrinsic value, fair value), premise of value, and significance of Revenue Ruling 59-60. The chapter includes an illustration of what an appraisal report looks like, that builds on ACME Industries, used earlier for illustrative purposes, but now used to highlight how the company may be valued using the excess earnings method and Revenue Ruling 68-609.

Chapter 11 through 14 covers damages. Chapter 11 provides the reader an overview of the legal concepts underlying damages, general classification of damages, subcategories of damages, classification, and categories of damages, as well as the financial concepts underlying damages analyses. Chapter 12 focuses on personal economic losses. Here, the focus is a personal injury or wrongful death damages calculation. This chapter also discusses the discount rate calculations and net discount rate method. Chapter 13 focuses on commercial damages. Here, Brining discusses damages from breach of contract, commercial damages from torts, calculating lost profits damages, discounting future lost profits, and date of valuation. These are covered in a matter of a few pages. This textbook does not delve heavily into the subject matter to the level of other books that have been reviewed by QuickRead. The danger to the readers is that they may assume that the subject matter is simple since it is covered in 13 pages, when that is not the case. While Brining states that the “calculation of lost profits is a complex matter that is heavily dependent upon the unique facts of each particular case. In its simplest form, the calculation is simply a projection of the hypothetical profits that would have existed ‘but for’ the defendant’s action, minus the actual profits that did exist after the defendant’s action.” Readers would have benefitted by stressing the complexity and referring them to more current treatises on the subject matter.

Chapter 14 covers opinion evidence and expert testimony. Here, Brining covers the attorney’s role versus the role of the expert, the legal privileges relating to expert witnesses, using and opposing experts in litigation, taking effective expert depositions, eliciting opinion at trial, and cross-examination. This chapter is also short. It is focused on California law, yet, the principles discussed easily apply to other jurisdictions (state and federal).

Conclusion

Brian Peter Brining, JD, CPA’s Financial & Accounting for Lawyers, Second Edition is a solid reference book for business and plaintiff law attorneys that are committed to learning the issues that arise in contract disputes, damages cases, dissolution of marriage, and, to a lesser extent, bankruptcy. The book is a starting point, not an end point. This latter point is one that may inadvertently escape the attention of the target audience. Despite this point, the book shines setting forth key accounting issues that transactional and business litigation attorneys need to know. It also does a good job providing an overview of valuation and damages issues that legal counsel will encounter and that the state and federal bars do not, in this writer’s opinion, adequately cover.

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Roberto H Castro, JD, MBA, MST, CVA, is Managing Member of the Law Office of Roberto H Castro, PLLC and Legal Compliance counsel for Equilus Capital Partners, LLC, a closely held REIT. He is also Technical Editor of QuickRead and a member of NACVA’s CUV team.

Mr. Castro can be contacted at (509) 679-3668 or by e-mail torcastro@rcastrolaw.com.